What does Open Shading Language ( OSL ) mean?
Open Shading Language is a programming language designed for writing shaders.

From the OSL page:


  Open Shading Language (OSL) is a small but rich language for
  programmable shading in advanced renderers and other applications,
  ideal for describing materials, lights, displacement, and pattern
  generation.


A Script node was added in blender 2.65 that allows users to use OSL shaders in Cycles.